Source: Flickr / Ivan David Gomez Arce.
Technological advances have made everyday living easier for consumers and businesses alike. But with an ever increasing frequency of new cyberthreats, it seems like everyone is exposed to potential losses. Though the cyber-insurance market is still gaining steam, American International Group (AIG 0.05%) may be perfectly poised to rule the virtual landscape.
Imminent threats
Some of the perceived threats from new cyberattacks sound like stuff pulled straight out of movies and television. Internet-enabled pacemakers being hacked for nefarious (read: murderous) reasons. Traffic signals manipulated to cause accidents. Trains rerouted -- this last one has actually happened, according to AIG's global head of professional liability, Tracie Grella.
And all of these potential (or actual) incidents have one thing in common: damage to property or people. With that in mind, American International Group has introduced a new insurance product that would cover the property damage and personal injury cost caused by cyberattacks.
The new offering acknowledges that the losses stemming from cyberthreats can extend far beyond the traditional financial losses from data breaches. But even with more focus on cyberattacks, the market for insurance coverage still has a long way to go.
Surge protection
The past 12 months have produced a number of computer-based attacks, spurring a surge within the cyber-insurance market. AIG reported a 30% boost in premiums from its cyber division for 2013. However, the increase in talk of the need for coverage hasn't translated directly into companies rushing the insurers' offices.
Source: heartbleed.com
According to a report from Experian, only 31% of companies have coverage for cyberthreats. A rough estimate of the cyber-insurance market's size from Betterley Risk Consultants hit the $1.3 billion mark in June 2013. Since that time, businesses and consumers have had to deal with the widespread Target data breach and the Heartbleed security bug, which has impacted hundreds of thousands of Internet sites.
Various governments across the globe have issued statements to their population of the risks posed by the Heartbleed bug, with the United States particularly concerned about security breaches at critical infrastructure players, including energy and transportation.
On the front line
Due to the importance of securing essential functions provided by energy, finance, and transportation companies, the U.S. government has been encouraging development of a robust cyber-insurance market.
American International Group finds itself in a particularly favorable position during this surge of interest in cyber insurance. The megainsurer has provided coverage to businesses for cyberthreats since 1999 and has one of the largest networks for claims resolution, which is often complicated due to varied state laws, etc.
One of the top hurdles for insurers is customer concerns that current coverage levels won't include protection from a wide range of damage caused by an attack. With its new product complementing its existing cyber insurance offerings, AIG has made sure that it has covered all the bases as customer needs develop.
As a recognizable figure within the insurance industry, with comprehensive product offerings and a long-standing record of cyber-related coverage, AIG may be one of the big beneficiaries of increased fear of cyberattacks. A young market and increased awareness of the need for insurance coverage could position AIG squarely in the center of a huge growth opportunity.
